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The People's Pension, one of the largest of the new breed of pensions managers in the UK market, has hired State Street as its new core fund manager – in what could be the first step to a major overhaul of its investment strategy.

The People's Pension, a not-for-profit savings provider that has grown in the past three years to take in 1.6 million members, has until now had a simple, low-cost investment strategy using index-tracking funds from Legal & General Investment Management.

But Chris Reilly, investment proposition manager at the pension fund, told Financial News this morning that the appointment of State Street presaged a broader review of investments to be undertaken next year.

He said: "To start with, very little will change. When the move of funds to State Street as our new passive manager takes place, very early next year, the strategy will stay broadly the same. But we will be looking at a new strategy, tailored to the new retirement freedoms, in early 2016."

In April this year, the UK government implemented reforms that mean retirees are no longer obliged to use their pension savings to buy annuities – insurance products that offer a guaranteed income for life. Instead, any time after the age of 55, they can take their money out as cash or invest in post-retirement investment funds, known as 'drawdown funds'.

The reform has led to investment-strategy reviews at many of the UK's big pension funds, including the public plan backed by the government, the National Employment Savings Trust, which is the only new provider larger than the People's Pension.

The win is a coup for State Street's UK-based business covering defined-contribution pension funds, which is led by Nigel Aston. Funds under management at the People's Pension are small - £531 million as of June 30 - but expected to grow quickly, with 1.6 million members contributing at least 8% of salary a year.

The Pensions Regulator expects 1.8 million UK small and micro businesses to register their employees for a pension scheme for the first time by 2018. And according to market researchers Spence Johnson, master-trusts like the People's Pension and its rivals will manage £125 billion by 2024.

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Reilly said that he could not provide any further details on the People's Pension's investment review at this stage – but one of the key reasons behind the choice of State Street was its development of a broad range of alternative pension investment funds.

In August, State Street launched a new Timewise Target Retirement Choice fund, aimed specifically at "those likely to remain invested in retirement" following the new freedoms, the company said at the time.

The fund is diversified across developed and emerging market equities, government and corporate bonds and a range of alternative assets, and incorporates risk controls to mitigate market volatility.

In a statement today, the People's Pension's chief executive, Patrick Heath-Lay, said: "We have some exciting plans for the future and the move to SSGA is the first step in bringing those plans to life."

Reilly said that the 2016 might potentially involve other fund managers being brought in alongside State Street: "Broadening the number of fund managers is something we would look at, but we have no firm plans at the moment."

He added that there would be no change to the scheme's low-cost charging structure, however. The People's Pension has an all-in fee for members of 0.5% of managed assets per year.

The average fee for DC pension schemes in the UK is around 0.62% of assets, according to figures from market researchers Spence Johnson, and has been falling in recent years.